Monday, 5 May 2008

Labour opens chequebook to Renationalise Rail

Oh dear, they've actually gone and done it... Clark and Cullen have announced this morning that they have spent $665 million of public money to buy back Toll's rail and ferry business, after many months of negotiations.

PM Cluck claims that renationalising the trains would "pave the way for the modernisation of the rail network, which formed a key part of the Government's sustainability agenda."

Finance Minister Michael Cullen will be rubbing his hands together with glee at the purchase, which will trim the Government's coffers even further, giving him yet another excuse to claim that tax cuts for ordinary New Zealanders are not affordable.

The $665 million purchase translates to around $200-$300 for the average taxpayer, which could have gone directly to relieving the pressure of increased food and fuel costs. (And that's before the "couple of hundred million" Labour also plan to spend on expanding the rail network).
The Labour-led minority coalition Government is hell-bent on doing everything it can to ensure that it spends every cent it has got before the election, and locking up as much future spending as possible to hamper the plans any incoming Government.

The current Labour government has used the backdrop of a growing economy (inherited from previous administrations) to bury massive wasted spending on bureaucrats and inefficient state departments. PM Cluck herself has 9 "spin doctors" (more than UK PM Gordon Brown!)

The fastest growing sector since Labour seized power in 2000 has been government administration, with the number of bureaucrats increasing from 26,000 to more than 36,000.

When Labour's talks with Toll were made public in March, National Party deputy leader Bill English said that governments had a bad record of operating rail companies, and that a National-led government would look to get out of the business as quickly as possible.

English also warned that a renationalised railway company would see a return to strikes on the ferries over school holidays, along with a return to the Union-backed practice of "featherbedding" (where Unions require an employer to hire more workers than is necessary for a particular job).

In the early 1980s when the railways were state-owned, they "employed" a whopping 21,000 people, and were losing $1 million in public money every single day. Former Labour Party Transport Minister Richard Prebble says that translates to around $3 million a day in today's dollars.

* NZ Herald: Government buys back rail and ferries
* NZ Herald: Prebble scorns rail buy-back decision

* UPDATE: Nope, under John Key's National Party, the trains and ferries will apparently not be resold, and look set to remain in State ownership for the immediate future.

National are describing the buy-back decision as "reckless" and believe it will end up costing "many hundreds of millions more once rolling stock costs were added to the $665m purchase price".

That's potentially a billion dollars less available for returning some of the huge tax take to ordinary New Zealanders. That will make life more challenging for an incoming government, who will now need to make some gutsy decisions, including slashing state-sector bureaucracy and closing a raft of wasteful Government departments.

Toll New Zealand have admitted they didn't go out looking for a sale, but pressured into it by the Government. Managing Director Paul Little said, "I think we've got mixed emotions. We would have preferred not to have sold... Today is a day we feel pretty flat."

* Stuff: Rail buy-back condemned as 'reckless'
* Stuff: Toll books $235m profit on Govt sale

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